Public Accounts Committee Hearing, 11 March, 2010 Revenue Vote 2008 Opening Statement by Revenue Chairman, Josephine Feehily
Thank you Chairman for giving me this opportunity to make a short opening statement. As time is limited I will confine myself to giving a brief overview of the main issues facing Revenue in the current economic environment, some of which are referred to in the Comptroller and Auditor General’s Report before the Committee today.
The economic and financial environment within which Revenue’s customers, and therefore Revenue, operate has changed dramatically over the last year or so. Two statistics in particular give a real flavour of some of the more unwelcome changes. The first is the amount of taxes that we collected has dropped by over €14 billion since 2007 ( 2007 net receipts were €47.3 billion and 2009 net receipts were €33 billion ).
The second is that the outstanding tax debt, which is a reasonable substitute measure of the financial distress that many businesses and individuals are experiencing, has increased over 2 years by three quarters of a billion euro, or 68% ( from €1.1 billion to €1.86 billion ), and this is set to climb further in 2010. The scale of the tax challenge arising from this is very significant; we would need to increase the tax yield by over 43% just to get back to where we were in 2007.
I mention all of this, not to add further gloom to the public discourse on the economy, but to emphasise that Revenue is fully aware of the difficulties faced by taxpayers and is also deeply conscious of its overriding duty to protect and enhance the efficacy of the tax system. In this context, a positive trend in our collection programme is that the rate of timely returns compliance held up well in 2009, especially among the large cases. This is very important for Revenue, providing as it does the basis for debt management interventions.
If I were to pick just one word to encapsulate our approach in the current economic circumstances it would be ‘balance’. We have to balance our concern for taxpayers in genuine temporary difficulties with the requirement not to give them an unfair advantage over those taxpayers who are meeting their obligations and of course, as I have just indicated, with our absolute priority to safeguard the integrity of the tax system.
To give operational effect to this balance we have, as mentioned in the Comptroller and Auditor General’s Report, developed a framework. This framework enables consideration to be given to taxpayers and businesses that previously had satisfactory compliance records but due to the current economic downturn have experienced severe difficulty in meeting their obligations. Revenue has no desire to use the full weight of its enforcement powers against innocent victims of the recession, or to drag them through the Courts, but to avoid that, businesses must engage with us honestly, wholeheartedly and early.
Revenue needs taxpayers and businesses to meet their tax obligations on time. While viable businesses can and do encounter cash flow problems, these problems need to be addressed so that timely tax compliance is assured. Addressing those problems in consultation with Revenue at the earliest opportunity is essential so as to avoid a situation where debt problems become insurmountable or where avoidable interest or enforcement costs are incurred. As I have said before to this Committee, Revenue cannot act as a banker or lender to businesses in difficulty.
On the positive side, and there is more than one, Revenue has great staff and a culture of openness which includes an internal staff partnership structure. We have fostered and developed relationships with many external stakeholders. We listen with great attention to what these and State stakeholders such as the Comptroller and Auditor General and this Committee have to say. All of this will stand us in good stead in these more difficult times.
In summary, our priority this year is to protect our tax base by
- Continuing to make it as easy as we can for businesses and taxpayers to comply ( and in this regard we were rated by a recent survey as No. 1 in Europe for the 3rd year running )
- Giving otherwise viable businesses a fair hearing if they get into temporary difficulties, and finally
- Ensuring a level playing field for those who do comply by taking resolute action against those who don’t
Finally if I may take this opportunity to bring the Committee up to date on the Special Investigations mentioned in Paragraph 11.24 of the Comptroller and Auditor General's Report. I mentioned to the Committee last year that these investigations were close to conclusion. We did however launch an Investigation into Trusts and Offshore Structures during 2009 which, as of 1st of March 2010, has yielded €18.73 million from 98 cases. The running total since we began these investigations now exceeds €2.6 billion.
We have also decided to broaden the scope of the Offshore Assets Enquiry. In December 2009 Revenue obtained new Orders against the clearing banks in the State requiring the banks to provide information to Revenue on details of transfers to and from this State involving the jurisdictions of the Isle of Man, Jersey, Guernsey, Switzerland and Liechtenstein. In the initial phase of its investigation Revenue had sought details of transfers to and from the Isle of Man, Jersey and Guernsey where the transfers were made to or from the offshore entities of Irish banks. The current probe requires the financial institutions to provide information on all transfers, over a de minimis threshold of €5,000, and irrespective of whether the financial institution receiving or initiating the transfer had an Irish connection. The Orders are comprehensive and cover the twelve years to 31 December 2008 and include electronic transfers as well as cheques and drafts either drawn in the State and sent to the offshore jurisdiction or drawn in the offshore jurisdiction and sent to the State.
Thank you Chairman